There are three exceptions to the general rule:
A grant made by the government is not deducted if it is made
under Northern Ireland legislation and it is declared by Treasury
order to correspond to a grant under Part II Industrial Development
Act 1982. This means that the recipient gets capital allowances on
the whole of the expenditure.The Treasury order expired on 31 March
2003 and so Northern Ireland regional development grants made under
an agreement entered into on or after 1 April 2003 are deducted
from the qualifying expenditure.
There is one exception to this exception for Northern Ireland
regional development grants. The grant is still deducted from the
expenditure in line with the general rule if it is "netted off" by
paragraph 8 schedule 3 Oil Taxation Act 1975 for the purposes of
arriving at expenditure for petroleum revenue tax relief. If part
of expenditure met by the grant would have qualified for petroleum
revenue tax relief and part would not, apportion the grant so the
part which relates to expenditure which would be netted off is
deducted from the capital expenditure for capital allowances
purposes and the remainder is not.
Insurance moneys or other compensation moneys received for
the demolition or destruction or putting out of use of an asset are
not treated as subsidies or contributions. That means that they are
not deducted from expenditure that qualifies for capital
allowances.
Example 1 Gary runs a ferry service. One of his
boats is destroyed by fire. He uses the insurance moneys to buy a
replacement. The insurance moneys are not a contribution to the
cost of the replacement. This means that the full cost of the
replacement is qualifying expenditure for PMAs. The insurance
moneys may be brought to account as a disposal receipt
CA23250.
A contribution is not deducted if the following conditions
are satisfied:
If the person making the contribution is exempt from tax, assume
that that person is chargeable to tax when you decide whether the
second condition is satisfied.
Example 2 George and Andrew are friends. George is
a scriptwriter and Andrew is a shopkeeper. George makes a
contribution towards Andrew's expenditure on a new computer. You
cannot deduct George's contribution from Andrew's expenditure.
George cannot claim capital allowances on the contribution or
deduct it in calculating his profits as a scriptwriter.
